The American Welfare System: Origins, Structure, and Effects

The income maintenance system has evolved slowly and painfully over
time. Group by group, the problem of poverty in the United States has
been addressed piecemeal. Old people were taken care of by social security.
Veterans have benefits. Single mothers qualify for AFDC. The disabled are
paid SSI. The unemployed, if they were previously employed, draw unemployment insurance. Incapacitated workers can get workers' compensation.
Students are awarded grants and loans. But if one does not belong to a
recognized group, there are only two institutions to turn to: the military,
and the prisons. Far too many end up in the criminal justice system, which
is a very expensive alternative to rational and comprehensive income maintenance.

With a seven trillion dollar economy, it seems time to rethink our entire
approach to the general subject of income maintenance, not just welfare.
As Thomas Jefferson advised us:

I am not an advocate for frequent changes in laws and constitutions. But laws and institutions must go hand in hand with the
progress of the human mind. As that becomes more developed,
more enlightened, as new discoveries are made, new truths discovered and manners and opinions change, with the change of
circumstances, institutions must advance also to keep pace with
the times. We might as well require a man to wear still the coat
which fitted him when a boy as civilized society to remain ever
under the regimen of their barbarous ancestors.
665

The circumstances have changed from the times when govenments took
children away from their widowed mothers, forbade poor people from traveling, and compelled mothers to work rather than to rear their children. It
is not possible to live off the land, to escape to the frontier, to homestead
a farm. The very simple truth is that it takes money to live in a modern,
post-industial, urban society. As a society, we must find a rational system
to allocate support. We presently have a vast number of programs to accomplish this end. It is possible to consolidate them into a single system
that is simple, fair, efficient, and comprehensive. I am not recommending
that we do much more, only that we do much better.

Interestingly a credit and flat tax can closely replicate most reasonable progressive tax systems. I estimated the credit and flat tax that would duplicate
the actual tax structures in the United States from 1978 to 1990. The estimated
system matched the actual system to within a couple of percentage points. Had
I included the income-maintenance system, as I should have, the fit would have

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